General Electric Oil & Gas Will be Growth Driver: JPM

By Avi Salzman

General Electric (GE) oil & gas business now makes up about 15% of industrial sales, but that could change, writes Tusa. Oil & gas is a late-cycle business, and GE sells equipment in attractive areas like subsea development and “compression” (used in liquified natural gas, refining etc.). Eventually, Tusa argues, oil & gas could be as important to GE as health care.

“We see 15-20% plus profit growth at GE Oil & Gas over the intermediate term (consensus has about 20% EBITDA growth for peers 2012-2013). The orders price index at oil and gas has turned, but peer comments that ‘there’s plenty of business to go around” and that “we see less competition showing up at bids because everyone is busy’ show that you don’t have to take GE’s word for it – margins are inflecting with the best days to come.”

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